Chapter 453 Iron and Steel Factory

The steel industry was originally an industry with huge investment and long-term output, but driven by strong demand, it has become a profitable industry that can speculate in the short term. There is a saying in the Yangtze River Delta that "five ones" is circulating, "1 ton of steel only requires an investment of 10 million yuan, and a production capacity of 1 million tons only takes 1 year to complete, and investment can be recovered in 1 year." For a time, in areas with strong private capital such as Jiangsu and Zhejiang, steel plants waiting to be launched like mushrooms after a rain, and there are as many as hundreds of approved and then acted first.

It was precisely because of the great leap forward growth of the domestic steel industry. Since the previous year, with Wang Yun’s daily connection, Zhongxing International and Zhongchang Group reached a preliminary cooperation intention in searching for iron ore overseas, and subsequently made great achievements in Australia and other places. Last year, Xingwei Resources took advantage of the Brazilian financial crisis to successfully acquire a large number of circulating shares of the Brazilian Vale company at a low price, and obtained a valuable director seat of the company. Australia and Brazil, the two major sources that imported the most iron ore in China, have gained a foothold.

However, China's steel industry is typical of large but not strong. Most of these blindly launched steel companies have low-level repeated construction projects. Many steel plants launched along the coast are mainly for the production of construction steel, and there are not many new steel types. The production of many special steels still relies heavily on imports. Even the automobile steel needed for cars produced by Xingtian Power cannot meet the production requirements. Therefore, the central government is well aware of the chaos in the steel industry. Strict regulation of private enterprises newly joined the industry can only make a slight opening for steel projects that fill the national technological gap.

When Yang Xing was talking about joining the "Eighteen Arhats" that the country has strict restrictions on national basic industries such as steel, but the stricter the control, the richer the monopoly profits they enjoy. Once the cracks are opened, the temptation to private capital will be huge.

In the past 20 years of reform, the rise of a private enterprise in China was achieved by many grassroots factories outside the system playing the edge without any administrative resources and constantly breaking through the planned economic system. They sprouted from the countryside and started from "light small-scale" industries such as light textiles and fast-moving consumer goods, and gradually formed a powerful economic force. Now this private capital force has developed to the point where it can compete with large state-owned enterprises. The great development of terminal demand industries such as residential, automobiles and electronic communications in the country will inevitably form a huge demand for upstream basic industries such as steel, non-ferrous metals, electricity, coal, etc. China's industrial structure has undergone an inevitable adjustment from lightweight to heavyweight.

As state-owned enterprises focus on the big and let go of the small, establish a modern enterprise system and withdraw from many industries that were previously regarded as a forbidden zone, private entrepreneurs who have always been keen to smell have undoubtedly realized the major opportunities in front of them and have begun to transform. They have completed the original accumulation of capital and naturally turned to upstream industries such as steel and petrochemicals that have always been regarded as "banned" of state-owned enterprises.

Among them, the private wealthy businessmen on the coast are undoubtedly the most active. After all, they are the strongest and have the richest experience in reform. Among them, Rong Xinyou, a representative of Zhejiang Business Group, was even ahead of the front. As early as the mid-1990s, he noticed that with the rapid development of the country's economy, the era of comprehensive shortage in the national steel industry is about to come, which is a once-in-a-lifetime opportunity. At that time, he considered building a steel plant. Unfortunately, the country was extremely strict in the approval of steel projects, and private capital had no chance. In desperation, he settled for the second best and purchased the upstream steel product of iron ore mountain.

It is well known that domestic iron ore has low grades, and it is not considered to be known to people. China has proven iron ore reserves of 58.119 billion tons, ranking fourth in the world. However, the iron ore grade is 11 percentage points lower than the world grade, with an average grade of 33%. 97% of the proven reserves are poor ores, and rich ores with grades greater than 50% account for only 2.7%.

For example, when Shanghai Baosteel was launched, it was the *** Nikko who was grateful to Premier Zhou and sold half and gave it to the country. At that time, the two countries established diplomatic relations. Premier Zhou proposed that the two countries were neighbors with the same straits, and they should not argue but cooperate. China learned the advanced technology of the best, among which the steelmaking technology of the best is one of the cooperation projects. For this reason, Nikko almost copied a steel plant with its very advanced technology to Shanghai. This is the origin of Baosteel.

Baosteel's technical equipment was the best in China at that time, but after it was put into production, not only did the output not increase, but the quality could not be guaranteed. Conspiracy theorists immediately shouted that we were trapped by the people, and the other party tampered with the equipment. As the largest project to assist China at that time, this big hat naturally attracted the attention of both China and Japan.

Therefore, a joint investigation team established by experts from China and Japan carefully investigated and concluded that it was mainly due to the low taste of China's iron ore. That is to say, Baosteel cannot use domestic iron ore to make steel. As long as it learns its twin brothers in the country and directly imports Australia's rich iron ore to meet the steelmaking requirements. This means that in the early stage of the reform, we have to spend a lot of precious foreign exchange to import iron ore from abroad. As a result, conspiracy theorists still cursed the plan of the emperor, spent a lot of foreign exchange to build steel mills, and had to spend more money to import iron ore from abroad. Isn't this a prodigal?

Looking back at these arguments, it is funny. At that time, there was nothing wrong with the assistance to build Shanghai Baosteel, except for making small moves as a manufacturing opportunity for domestic enterprises. Basically, it was still sincere and sincere to help China. This is understandable. After all, not every foreigner was Bethune. At that time, most of the steel companies used importing foreign iron ore to prove that Baosteel was not the trap they set. Because the country's resources were poor, the iron ore reserves were very small, and there was no rich iron ore, the steel companies were looking for mineral resources all over the world as early as after World War II, and their final targets were Australia and Brazil.

Especially Australia is very close to Asian countries such as ***, and is the first choice for imported iron ore. Australia is vast and sparsely populated, and the wastelands in the western continent are even rare in travel. But as long as you fly over the wasteland, even outsiders can see how much iron contains these lands that appear completely red in the sun. Australia's red land has the soil with the highest iron content in the world, so it shows such a magnificent red color. In some inland locations, iron ore is even exposed directly on the surface. Not only is it easy to mine, but the iron ore also has a very high iron content, which is more than ten times the iron content of domestic iron ore.

Internationally, commodities such as copper, oil, and grain have been operated by hundreds of years of Western capitalism. Among them, the pricing of commodities such as oil relies on the game in the international futures market to form a benchmark price. The advantage of this is that prices are relatively transparent and competition is fierce. However, the pricing of iron ore is different. The production of iron ore is highly concentrated in countries such as Australia and Brazil because of the reserve relationship, which has led to a situation where most of the international iron ore production capacity is concentrated in the hands of the world's three major producers, namely Australia's BHP, Britain's Rio Tinto and Brazil's Vale.

As early as 1981, these three iron ore producers formed an annual annual price negotiation mechanism with the largest steel production giants in the world. Asia's Nippon Railway Corporation and South Korea's Posco Iron and Steel Corporation negotiated on behalf of their respective countries' steel companies and the three major iron ore giants respectively. As long as one of the world's steel companies reaches an agreement with the three giants, even if the benchmark iron ore price of this year is reached, other steel companies must accept the iron ore price within one year, and the three giants must not change the iron ore price without reason.

The advantage of this is that steel companies can obtain a relatively stable purchase price and prepare early in organizing production and estimating production capacity and inventory. The three giants can also obtain a stable source of income and will not be lost due to market changes. However, after all, the production of iron ore is monopolized by the three giants, and this pricing negotiation often ends with the three giants raising the price of iron ore. Japanese and Korean companies then early in the process of iron ore production in Australia and Brazil, or directly participate in the three giants to make up for losses inside the dike.

Rong Xinyou and Yang Xing were both the first to see the disadvantage of this situation on the domestic steel industry, a newcomer. As domestic steel production rose to the world's first, domestic large steel companies will sooner or later replace the position of Korean steel companies, and sit together with European steel companies to participate in iron ore pricing negotiations.

It is estimated that private steel plants cannot be mixed in this kind of negotiation, but they are unwilling to let domestic steel companies be slaughtered by the three giants. Rong Xinyou also wants to build a steel plant that can refine high-end steel, while Yang Xing intends to expand Xingwei Resources' business to iron ore development. The two hit it off. The two reached an agreement in 1998 to cooperate in exploration of iron ore in western Australia.

Driven by common interests, even though the twists and turns between the two brothers Rong Xinmin and Rong Xinyou were found, the two sides were still ready to deepen cooperation. At the end of last year, Rong Mingyou successfully bought all the shares of a medium-sized mining company in Australia and obtained the development rights of several high-quality iron mines. This made Rong Mingyou's iron dream within reach.

However, iron ore development is an industry with huge investment and slow results in the early stage. The infrastructure in western Australia is very backward, and iron ore is often rarely visited. After obtaining the development rights, it is necessary to repair roads, railways, accommodation facilities, and recruit workers to transport the ore. The most important thing is to find suitable ports in western Australia and the coastal areas of the country. Iron ore can be calculated at tens of thousands of tons, and the most suitable way of transportation is sea transportation.
Chapter completed!